Key takeaways
- The US dollar continues to decline from last week’s 18-month highs, influenced by lower bond yields and disappointing housing data.
- The British pound strengthens, rising 0.6% after a decrease in the UK unemployment rate to 4.7%.
- AUD/USD rises for the third consecutive day, as RBA Deputy Governor signals concerns about inflation and potential rate hikes.
- New Zealand inflation data is expected soon; a weaker reading may threaten the recent NZD gains.
- Overall, the Aussie dollar leads gains amid mixed currency movements.
US dollar extends reversal from recent highs
The US dollar extended its reversal from last week’s 18-month highs as US bond yields eased further, helped by lower oil prices and disappointing US housing market data.
The British pound was the strongest major currency overnight, with GBP/USD up 0.6% after the UK unemployment rate fell from 4.9% in July to 4.7% in August. Sterling also gained across most other major currencies.
EUR/USD gained 0.2%, while NZD/USD rose 0.4%.
In Asia, USD/JPY fell 0.2%, USD/SGD lost 0.2%, while USD/CNH declined 0.1%.
Aussie up for third day as Hauser warns on hikes
AUD/USD rose for a third straight day on Tuesday, gaining 0.4%, and has extended those gains this morning.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser warned that Australia’s inflation outlook has become “materially worse” and that the central bank’s key concerns have now materialised.
With the Melbourne Cup day rate decision approaching, the comments suggest markets may be underestimating the risk of another rate hike.
Hauser acknowledged that further tightening would be painful but signalled it may be necessary to prevent higher inflation expectations from becoming entrenched.
NZ inflation in focus
Looking ahead, New Zealand inflation is the next key release, due at 10.45am Thursday NZDT.
Markets expect inflation to cool, with the Bloomberg survey forecasting annual inflation to fall from 4.1% in the June quarter to 3.8% in the September quarter.
NZD/USD has recently rallied from key support at 0.5600 to a one-month high. A weaker-than-expected inflation reading tomorrow could put the recent recovery under pressure and see the kiwi give back some of its gains.
Aussie leads gains
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 24 October
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
